~ Investment Strategy

Macro Diary

Japan’s government has announced its stimulus plan. It is not 2% of GDP, as reports had previously suggested, but of a size that the government thinks will boost GDP by 2%. The actual size is Y10.2tr. The stimulus will cover four main areas: Tohoku reconstruction, disaster prevention, social security (including healthcare and education) and stimulus for regional economies. An analyst at Credit Agricole points out that there is already a lot of rebuilding going on in Tohoku and a shortage of construction workers, so the full effect of the stimulus may be less than the 2% intended.

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Chinese inflation increased from 2% YOY in November to 2.5% YOY in December, on account of higher food and energy prices, likely caused by the cold winter. China’s statistics are about to be wacky for a couple of months as the Spring Festival effect kicks in — the festival shifts from January to February this year, which will play havoc with seasonal adjustments. Still, I cannot but observe that China’s inflation is a lot lower now than it was in late 2011 and early 2012 when tightening measures were being introduced. I am not sure that an up-tick caused by specific factors will be enough to prevent any policy loosening.

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Bloomerg reports that some analysts have applied Benford’s Law to China’s economic data — which is helpful, as I had been planning to do such an exercise myself. There is no point in repeating work that you can read about. The article is here: http://bloom.bg/UZANDI. It doesn’t sound like the analysts have found evidence of wholesale manipulation; rather, their findings appear to be consistent with a propensity for rounding up. But it is further evidence that there is cause for scepticism about the numbers that China puts out.